MPI takes action to save local airlines

Airlines get stuck in adversity

In the latest draft Vietnamese business report for 2020 and 2021’s first five months released on June 17, the MPI proposed the State Bank of Vietnam to submit the government plans for a 4 per cent supporting interest rate on bank loans taken up by airlines between 2021 and 2023.

In addition, the ministry also recommended the Ministry of Transport (MoT) to revise Circular No.19/2020/TT-BGTVT to extend the 50 per cent discount on taking off and landing service fees and also applying the VND0 minimum price for national airline services at the end of 2021.

The MoT was also recommended to submit a proposal to the government to amend Resolution No.1148/2020 to reduce the environmental tax to VND1,000 (4.35 US cents) from VND2,100 (9.13 US cents) per litre of kerosene.

As airlines are unable to clear bank loans, the MPI also proposed the Ministry of Finance (MoF) to roll out other support measures. The MoF was recommended to propose decreasing value-added tax (VAT) by 50 per cent this year for businesses specialised in aviation, accommodations, and restaurant services to stimulate local demand.

Meanwhile, the MPI is also carrying out a string of solutions to support businesses and protect the local economy during the COVID-19 resurgence. These include making the use of the national budget more efficient and enhancing the disbursement of public investment capital. At the same time, it is necessary to quickly adjust foreign direct investment plans, and minimising regular spending by of local authorities.

Airlines stuck in adversity

After the prolonged COVID-19 lockdown, Vietnam Airlines is on the verge of bankruptcy while Vietjet and Bamboo Airways need hundreds of millions of US dollars to maintain operations until the end of this year.

According to the MPI’s draft report, Vietnam Airlines’ estimated losses reached about VND4.8 trillion ($208.7 million) in this year’s first quarter and up to VND10 trillion ($434.8 million) during the first half.

Meanwhile, despite efforts to optimise operation costs, Bamboo Airways recorded a deficit of VND3.5 trillion ($152.17 million) last year. Vietjet is in a similar situation with losses of up to VND2.528 trillion ($109.9 million) in 2020.

The newly-founded Vietravel Airlines, after four months of operation, had to restructure its entire operations after being submerged in losses by COVID-19.

According to the draft report, the local transportation market in 2020 dropped about 34.5-65.9 per cent in demand and 61 per cent in revenue against the same period of the previous year.

The third COVID-19 resurgence during this Lunar New Year once again put airlines in a corner with revenue plunging 80 per cent on-year. In case the fourth and latest outbreak is brought under control, airlines will take at least three years to fully recover.